By Elliot Smith, CNBC -
NBC News
First Citizens Bank & Trust Co. will buy Silicon Valley Bank (SVB) deposits and loans, the US Federal Deposit Insurance Corporation (FDIC) reported on Monday, just over two weeks after the biggest US banking collapse since Lehman Brothers.
The deal includes the purchase of approximately $72 billion in assets from the SVB at a discount of $16.5 billion, but about $90 billion in securities and other assets will remain "in Receivership for FDIC disposal."
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"In addition, the FDIC has received appreciation rights to common stock of First Citizens BancShares, Inc., Raleigh, North Carolina, with a potential value of up to $500 million," the FDIC said in a statement.
This comes after the regulator transferred all of the SVB's deposits and assets to a new "bridge bank" earlier this month, in an effort to protect depositors from the failed lender.
“The former 17 branches of Silicon Valley Bridge Bank, National Association, will open as First-Citizens Bank & Trust Company on Monday, March 27, 2023,” the FDIC announced.
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March 22, 202301:50
“Customers of Silicon Valley Bridge Bank, National Association, should continue to use their current branch until they receive notification from First-Citizens Bank & Trust Company that systems conversions have been completed to enable full-service banking at all of their locations. other branches".
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First Citizens Bank and the FDIC also entered into a "loss-sharing transaction" - in which the FDIC absorbs part of the losses on a certain set of assets - on commercial loans purchased from bridge bank SVB.
“The loss-sharing transaction is expected to maximize recoveries on assets by keeping them in the private sector.
The transaction is also expected to minimize disruptions for loan customers," the FDIC explained.
Customers outside a Silicon Valley Bank branch in Beverly Hills, Calif., on Monday, March 13, 2023.Lauren Justice/Bloomberg via Getty Images
The regulator added that the estimated cost of SVB's bankruptcy for its Deposit Insurance Fund will be around $20 billion, with the exact cost to be determined after the end of the receivership.
Regulators shuttered SVB, a big name in the technology and venture capital sector, and seized control of its deposits on March 10, in what was the biggest failure of a US bank since the global financial crisis.
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The collapse came after the bank's clientele withdrew billions from their accounts and the value of assets once considered safe - such as US Treasury bills and state-backed mortgage securities - fell sharply on aggressive interest rate hikes by the Federal Reserve.
This left the bank adrift in its attempt to raise $2.25 billion to meet clients' withdrawal needs and finance new loans.
On March 10, bridge bank SVB had about $167 billion in total assets and about $119 billion in total deposits, the FDIC confirmed.
The SVB bankruptcy shocked banks around the world and was cited as one of the catalysts for the downfall of Swiss giant Credit Suisse and its emergency bailout by national rival UBS.
However, many analysts believe that the ensuing market volatility has been unwarranted, given “idiosyncratic” failures that left banks such as SVB and Credit Suisse exposed and caused a loss of investor confidence.
